This following practice is typical for retailers in certain areas: when a larger retailer wants to buy the smaller ones, the buyer asks for the list of the smaller stores customers and their buying history, then it makes an offer based on the projection that how many of the current sellers customers continue their business with the buyer. The challenge is that there is no guarantee that the existing customers of the small store (the seller) will continue their business with the buyer. Company A (the seller) is in process of acquiring Store B, with its 6780 customers. Their estimate shows that the acquisition makes sense if the customers who move to Company A is 70% or above. However, for 60 % or less, it does not make sense. Company A wants to conduct a study to estimate the probability of customers moving from Store B to it.
a.What is your sampling strategy? (You need to do some literature review to learn about how sampling is done for consumers) What should be the sample size and why? Explain.
b.What is the probability that the sample suggests that it is a good deal for Company A to acquire Store B even if the true proportion of the customers who would continue is 60%?
a.What is the probability that the sample suggests that it is not a good deal for Company A to acquire Store B even if the true proportion of the customers who would continue is 70%?
b.Write a short report on what you recommend (e.g., your sampling size, under what condition would you recommend the acquisition, etc.)